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Vanguard Editorial: Latest bank reforms

Latest bank reforms

Editorial

Friday, December 11, 2009

CENTRAL Bank of Nigeria Governor, Sanusi Lamido Sanusi has lost the gusto with which he spoke about his banking reforms.

When he threw out the managing directors of five banks last August, he accused them of infractions that threatened the health of the entire banking sector.

Chief among these allegations were that they gave bad loans to the tune of N1.3 trillion. If the issue was not addressed, the five banks, he said, could take down other banks and put the economy on further spin. Not many believed his agenda or the motive.

Another three bank managing directors have lost their jobs to Sanusi's reforms. Job losses have become the norm in the banks. The banks seem to be competing with each other over which would sack more staff.

The cost to the banks of sacking staff, some of whom have been trained at great costs, is one of the panic measures described as cost cutting measures. It is obvious that the businesses of banks have suffered from a loss of public confidence in them.

Banks are not making enough money to keep the staff. Services in most banking halls are already reflecting the staff cuts and uncertainties over the health of the industry.

With eight banks on daily, direct supervision of the CBN, credits have been frozen and banks cannot make the money they used to get from lending. Businesses are not borrowing and banks appear uncertain about the CBN's criteria for lending. Sanusi said last August that he was the one to determine whether a loan was performing or not.

The CBN is also encountering articulated opposition from bank shareholders, who think that they have a right to their investments. Some of the matters are in court, in addition to the Economic and Financial Crimes Commission (EFCC), charging the managing directors of the affected banks to court.

News filtering out of the banks would worry anyone. While the CBN claimed it took over the banks to improve their governance, recover loans and prepare them for sale, some of its appointed managing directors are already writing off the loans of some debtors, as concessions.

It is to say the least a scandal that instead of recovering loans from debtors, who have enough assets that could be used to liquidate the loans, any bank could write off the loans, while wasting time in chasing small debtors.

The compensations and luxuries the CBN appointed managing directors have laid out for themselves is another source of scandal. If costs are to be cut, should it exclude the emoluments of the managing directors? These matters have dented whatever the banking reforms were meant to achieve.

Sanusi's silence could have been informed by the realisation that his banking reforms are skewed towards achieving aims that well known to him alone.

Without a clearer policy on the banks, Sanusi would have a tougher time explaining his reforms.

Regions : Africa

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